By Britt Erica Tunick
Dogecoin may have started out as a joke but, with the cryptocurrency’s collective value having climbed as high as $54 billion earlier this week, it is no laughing matter for investors. Nonetheless, investors may want to think twice before diving too deeply into the wildly popular crypto token.
Created in 2013 by two software engineers, Dogecoin’s name is a play on the combination of Bitcoin and the Internet meme known as Doge —two of the most popular things in the online world at that point in time. Since the latter is a meme that usually features a picture of a Shiba Inu dog, the source of the brand’s popular canine image is quite obvious.
Funny dog memes won’t help this one
The crypto token’s humorous dog image was quickly embraced and helped it to become extremely popular on social media, leading to its adoption as a popular way for Reddit users to tip one another as a sort of reward for posting amusing or interesting online posts. Even Facebook got in on the action in 2014, when the social media giant approved the Doge Tipping App, which also allowed people to tip others with Dogecoin tokens instead of just using the basic “like” icon – and which made Dogecoin Facebook’s first officially approved crypto currency.
A group of Reddit users are such big fans of Dogecoin that they have long devoted themselves to helping send the token’s value soaring, much in the same way that Reddit fans recently banded together to send GameStop’s stock price through the roof. Dogecoin even has the celebrity backing of a handful of big names, such as Tesla’s CEO Elon Musk and rapper Snoop Dogg, among others.
“A place where young kids are gambling”
In recent days, all the above, coupled with overall rising investor interest in cryptocurrencies as a whole, helped Dogecoin rank among the top 12 cryptocurrency companies in the world, temporarily giving it a market cap worth even more than some blue chip stocks, such as Ford Motor Company. Despite all that, however, sophisticated investors are keeping their distance in favor of more sophisticated cyrpto currency alternatives.
“It is rare that new asset classes are built, and right now Bitcoin is about half a percent of global wealth,” said Mike Novogratz, Galaxy Digital’s CEO, noting that new asset classes typically migrate to become 6% to 8% of someone’s portfolio. “But crypto is a complicated one. You’ve got Bitcoin, which really is a digital gold and is a store of wealth. But you have other stores of wealth too. Shockingly to me, Dogecoin is nothing but a place where young kids are gambling and storing wealth,” Novogratz told members of the New York Alternative Investment Roundtable on Thursday.